Shares in major chip firms have experienced a sharp decline across US and Asian markets, signaling a deepening sell-off in artificial intelligence-related stocks and rattling investor confidence.
South Korea’s benchmark Kospi index was temporarily paused on Tuesday morning after an initial slide of 8%. The 20-minute halt, triggered by a stock market mechanism known as a circuit breaker designed to calm panic selling, saw the index fall further, trading around 10% lower upon resumption. This slump was predominantly led by technology firms, with Samsung Electronics and SK Hynix both recording falls exceeding 10%. The tech-heavy Kospi has been particularly volatile in recent months, attracting large numbers of retail investors. It had more than doubled from the start of the year to mid-June but has since lost around a third of its value. This marks the eighth time the index has triggered a circuit breaker this year.
Nvidia’s Valuation Shift
The regional declines follow a significant movement in the US market, where AI chip giant Nvidia saw its shares fall by 5% in New York on Monday. This decline resulted in Nvidia losing its position as the world’s most valuable listed company, a title it had recently claimed, to Apple. The iPhone maker’s shares have risen by approximately 25% this year, contributing to its re-ascension.
Nvidia’s shares fell on Monday after the Wall Street Journal reported the company is in talks to provide around $250 billion for OpenAI as part of a massive data-center project. US-listed shares in SK Hynix also experienced a notable drop, falling by 7.5% on Monday to well below the $149 offer price from its record-breaking Nasdaq debut on July 9.
Broader Market Contagion and Profitability Concerns
The downturn was not confined to South Korea. Japan’s Nikkei 225, another index dominated by technology companies, also reflected the contagion, trading almost 4.5% lower on Tuesday morning. As governments and corporations commit hundreds of billions of dollars to developing AI capabilities, some analysts have begun to question whether the technology can ultimately become profitable enough to justify such immense investments. This underlying concern appears to be contributing to the current investor jitters, prompting a re-evaluation of valuations in the rapidly expanding AI sector.
The widespread sell-off underscores a growing caution among investors regarding the sustainability of the high valuations seen in AI-related stocks, suggesting a period of recalibration as the market assesses the long-term financial returns of the artificial intelligence boom.
